Monday, April 17, 2017

Walmart Discount

Walmart announced this week that it plans to offer discounts on products through Walmart.com for online shoppers who agree to pick up orders at a nearby store instead of requesting home delivery.

The new offering will shave between 3 percent and 5 percent off regular prices based on some of the offers Walmart announced, such as a $50 discount on a $1,698 70-inch Vizio TV. The discount program will launch with 10,000 eligible products in April and expand to more than one million items by the end of June.

Walmart can afford to provide discounts on these items because it saves money on its logistics costs. It can ship them in a full truckload to a Walmart store, which is much cheaper than paying a delivery partner such as UPS or FedEx to take a single item to someone’s home. The move seems like a step in the right direction as Walmart attempts to turn its physical stores into an advantage for its online business rather than legacy baggage.

“I’ve been thinking about this for a long time and feel lucky I’m someplace where I’m empowered to make these changes,” Marc Lore, Walmart’s e-commerce chief in the U.S., said in an interview with Recode. “This is us leveraging the unique assets of Walmart to drive costs out of the system and bring consumers lower prices.”

If you’ve read or listened to comments from Lore before, the last part of that sentence should sound familiar. That’s because the whole idea of Jet.com, the startup he founded and sold to Walmart for $3 billion, was to figure out innovative ways to bring down logistics costs and to pass some of those savings on to shoppers.

The announcement comes as Walmart and Amazon are engaged in a fierce price war in the consumer packaged goods category, which encompasses items like diapers, shampoos and snacks that are crucial to Walmart’s in-store business. This new discounting model, however, will only apply to items that aren’t available in Walmart’s stores, meaning it marks an expansion of Walmart’s pricing aggressiveness to other categories such as electronics, home goods and baby gear.

The question for Walmart is how many online shoppers are willing to take a trip to the store to save 3 percent or 4 percent. If the answer is a lot, Walmart could also benefit from some customers deciding to buy more goods in the store when they go to pick up their online order. While Lore acknowledged this upside, he insisted it’s not the driving force behind the decision.

Another question: Whether Amazon will decide to price-match the discounted price anyway.